After State Bank of India (SBI), India’s largest bank, slashed interest rate on home loans, other lenders including ICICI bank and HDFC are likely to follow suit and reduce home loan rates.
India’s largest private lender ICICI Bank which reduced the MCLR (marginal cost based lending rate) by 0.10% to 8.95% last week is also set to reduce the home loan rates today, an official said.
On Wednesday, SBI cut its home loan rates by 0.15% to 9.15% — a six-year low — to cash in on the festival season and grow its retail loan book. This limited period festival offer is valid from November 1, 2016 to December 31, 2016, SBI said.
At present, SBI Home Loans provides the lowest interest rates for new home loan borrowers, while existing borrowers are given an option to switch to the new rates after paying a fee. ICICI bank and HDFC offer loans at a rate of 9.3%.
A private sector bank official said after SBI, many banks will follow suit given the competition in the market and to attract customers towards their loan products.
Karthik Srinivasan, senior VP, co-head, Financial Sector Ratings, ICRA rating agency said, “We do see up to 15-20 basis points (0.15-0.20%) room left for banks to further cut interest rates.
SBI’s revised rates for new borrowers will be for loans up to Rs 75 lakh. For woman borrowers, SBI has brought down the interest rate to 9.10% per annum from 9.25% while for others to 9.15% from 9.30%. This means that on a home loan of Rs 50 lakh of 30 years, a home buyer can save Rs 542 per month on EMIs.
This rate cut by SBI could increase the pressure on other banks to bring down their interest rates on home loans, consumer, auto and other personal loans.
The rate cut comes after the Reserve Bank of India reduced key policy rates by 0.25% to 6.25% last month.
Amid a low demand for loans from big corproates, banks are focusing on growing their business from retail loans, especially home loans.
As per RBI data, housing loans have shot up to Rs 7,86,900 crore as of August 2016 as against Rs 6,74,500 crore in August 2015, a rise of 16.7%.
On Wednesday, ICICI Bank also announced for its salaried customers a credit offering from Rs 5 lakh going up to Rs 1 crore against property owned by them. The product, ‘ICICI Bank Home Overdraft’, will offer dual advantage of a term loan as well as an overdraft facility, the bank said in a statement. “While the term loan provides customers with quick funds for immediate needs, the overdraft facility offers them the flexibility to access funds instantly for expenses, as and when required,” it said.